New report reveals car-related debts could significantly reduce homebuyers' purchasing power
The rising cost of auto loans and related expenses is putting pressure on mortgage affordability, especially in cities like Calgary, according to new report by Zoocasa.
Zoocasa’s analysis shows that the average monthly cost of owning a car, including financing, gas, insurance, and maintenance, totals $1,427. This is 54% of Calgary’s average monthly mortgage payment of $2,655 for a home priced at $631,527.
For renters in Calgary, the impact is even heavier – car expenses account for 80% of the average monthly rent for a one-bedroom apartment.
“Debt reduction is probably the headline for this more than anything,” said Tarek Hageahmad, realtor with eXp Realty in Calgary. “But to the answer whether car loans have an impact on buyers, in some cases: ‘yes.’”
In Newfoundland and Labrador, car costs amount to 107% of the average monthly mortgage payment, the highest in the country. In contrast, Greater Vancouver sees the lowest impact, where car expenses are 27% of a typical mortgage payment.
In Saskatoon, car costs exceed the average monthly rent by 12%, the highest rate among major Canadian cities. Meanwhile, Vancouver renters experience the least impact, with car costs at 53% of average monthly rent, according to the report.
“Anyone with a car loan is going to see their purchasing power reduced,” Hageahmad said. “So it’s really about looking carefully at the trade-offs.”
While not every buyer is held back by car loans, some homebuyers face a challenge in the mortgage application process.
Calgary mortgage broker Matt Leggett from Ratehub.ca described one recent case where a couple’s $300,000 in auto loans and $8,000 in monthly payments completely disqualified them from buying a home.
“I don’t come across this often, but it definitely comes up,” said Leggett. “They couldn’t qualify for anything.”
Hageahmad agreed, noting that the issue often affects younger buyers who prioritize expensive vehicles early in their careers.
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“It’s really about needs versus wants,” he said. “If you realize owning any vehicle is more of a want, it could lead you to a much better realization of where you should live.”
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